ARCHIVED -  Decision CRTC 88-772

Decision

Ottawa, 27 October 1988

Decision CRTC 88-772

First Choice Canadian Communications Corporation

Toronto, Ontario -880304100

Following a Public Hearing in the National Capital Region commencing 13 June 1988, the Commission renews the licence issued to First Choice Canadian Communications Corporation (First Choice) to carry on an English-language pay television network in eastern Canada (Ontario, Quebec and the Atlantic provinces), from 1 November 1988 to 31 August 1993, subject to the conditions of licence specified in the appendix to this decision and in the licence to be issued.

This term, the end of which conforms with the end of a broadcast year, will enable the Commission to consider the renewal of this licence at the same time as that of other Canadian pay and specialty licences.

The Commission requested each licensee whose renewal application was under consideration at the 13 June 1988 hearing to provide a precise description of the programming it proposed to offer during the new licence term. Specifically, the Commission sought assurances that each of the Canadian pay television and specialty networks will continue to provide an attractive range of quality programming within a specific format, while avoiding any undue siphoning or duplication of the program material provided by other members of the Canadian broadcasting system.

First Choice proposed that its service be defined as "a regional general interest service in the English language with programming intended for all audiences". The licensee stated that it would not distribute any programming in the categories of news, religion and formal education.

In response to an intervention from The Sports Network (TSN) concerning the amount of sports programming which First Choice could offer, the licensee indicated at the hearing that its sports programming would not exceed 10% of its total scheduled hours over a six-month semester. It stated that it needed the flexibility of this 10% figure to make up for TSN's migration to basic cable service and because of the uncertainty that there will be sufficient Canadian feature film and feature-length drama in future years to meet its Canadian programming exhibition requirements.

Given the discretionary nature of the service provided by the general interest pay television networks and the relatively small impact of such services on conventional television and specialty services, the Commission is willing to allow First Choice a certain amount of flexibility with respect to that portion of its program schedule consisting of other than dramatic programming. Nevertheless, in light of the important mandate of the pay television licensees to contribute to diversity and to provide new opportunities and revenue sources for the Canadian film and video production industry, the Commission considers that First Choice should refrain from relying too heavily on sports programming in its schedule. The Commission notes that, in its renewal application, First Choice had indicated that it would program a maximum of only two hours per week of first-run sports, with no repeats. This figure would represent just over 1% of its weekly schedule, averaged over a six-month semester.

Accordingly, after taking into account the licensee's proposal and the discussions at the hearing, the Commission has attached as a condition of First Choice's licence the requirement that at least 50% of its programming schedule consist of dramatic programs, with no more than 5% of the program schedule averaged over a six-month semester being devoted to sports programming.

In the interest of flexibility, and within the 5% limit, the Commission will permit the licensee to distribute up to a maximum of 20 hours of sports programming in any week, including repeats. This will permit the licensee to provide coverage, for example, of a specific sports tournament. At the same time, the Commission expects the licensee not to siphon sports programming currently being distributed by a Canadian specialty network or by a Canadian conventional television licensee.

First Choice's Performance

Approximately 87% of First Choice's current program schedule is comprised of feature films and feature-length dramatic programming. The remainder is made up of bridging material (interstitials), a minimal amount of music concert presentations and occasional sports events, promotions for upcoming films, short films including the "Great Canadian Shorts Contests" (now in its fourth year) and music videos. By programming about 365 new movies each year, First Choice offers a wide selection of films from all over the world, a diversity of subject matter and a cross-section of movie genres. Indeed, this number of new movies exceeds that offered by every other North American movie service.

At the hearing, First Choice filed month-end subscriber figures for the period February 1985 to May 1988 which showed an increase of 47% in the number of its subscribers, from 324,000 to 476,000.

In Decision CRTC 86-812 dated 2 September 1986, the Commission required First Choice, by condition of licence, to devote 30% of the total time during prime viewing hours (defined for the purpose of this licensee as being the period from 6:00 p.m. to 10:00 p.m. Eastern time) and 20% of the remainder of the day to the distribution of Canadian programming. In addition, First Choice was required, by condition of licence, to devote 50% of this Canadian programming time to the distribution of dramatic programming including, but not limited to, dramatic feature films.

First Choice reports that, during the period from 1 September 1986 to 31 August 1987, it surpassed its minimum levels of compliance concerning the exhibition of Canadian programming, averaging 34% in prime viewing hours and 25% over the remainder of the day measured on a semester basis. In terms of actual numbers, First Choice stated:

From June 1, 1986 to May 31, 1987, we ran 59 Canadian features on the service, of which 10 were actually packages of half-hour [episodes of "The Hitchhiker" series] which were grouped together into trilogies, so it was actually 49 different original Canadian features.

From June 1, 1987 to May 1, 1988, that number is up to 68 different Canadian features. Of those, 60 were new, which is 88% -and "new" in this context means a film that has never been shown on television before.

So the number of titles has gone up quite dramatically and it has allowed us to lower the repeat factor significantly. The result has been audience satisfaction.

First Choice also indicated in its application that it had consistently exceeded its condition of licence requiring 50% of its Canadian programming to be in a dramatic format, reporting that in the period from 1 September 1986 to 31 August 1987 Canadian dramatic programming amounted on average to 56% of all Canadian programming hours and 65% of the time devoted to Canadian programming between 6:00 p.m. and 10:00 p.m. Eastern time.

Decision CRTC 86-812 also required First Choice, by condition of licence, to expend 20% of its annual gross subscriber revenues on investment in or acquisition of Canadian programming. In its application, First Choice reported that it spent some $66.3 million on Canadian programming from the time it was licensed to 31 August 1987, including a total of $18.1 million over the broadcast years 1985/86 and 1986/87. This latter figure represents expenditures of 20% and 21.6% of the licensee's gross subscriber revenues in the two years, respectively.

With respect to script and concept development, First Choice has met its commitment made in 1986 to ensure that the Foundation to Underwrite New Drama for Pay Television (FUND) has a minimum annual budget of $1 million. Established to stimulate new scripts and for the development of talented but not yet established Canadian script writers, FUND has been warmly received by the film and video production industries. In the period 1 June 1986 to 31 August 1987, FUND dispersed more than $1 million to 119 projects, three of which have moved beyond the script stage to full production.

The Commission is satisfied that First Choice has generally complied with the terms and conditions of its licence and has exceeded both the expenditure and exhibition requirements with respect to Canadian programs. It also notes that such compliance and the licensee's adherence to the original orientation of the service have not hampered the popularity of the network, as evidenced by the number of its subscribers.

Prior to Decision CRTC 86-812, First Choice had projected a cumulative deficit of $107.2 million by 31 August 1989. In its present application, however, First Choice indicated that it became profitable in 1986. The Commission notes that as of 31 August 1987 the cumulative deficit of this service, excluding the pre-1984 debt associated with the French-language service, Premier Choix: TVEC Inc., had been reduced to $36.3 million.

Financial Projections for the New Licence Term

The licensee submitted three sets of projections for the upcoming licence term: a "conservative" scenario, based on the assumption that the number of subscribers would increase only gradually over the new licence term, reaching a total of 530,000 households by 31 August 1993; a "positive" scenario which projected that, starting with 494,000 subscribers as of 31 August 1988, subscriber levels should increase over the five-year licence term to 524,000 by the end of year one and attain a level of 615,000 by the end of year five; and a "hopeful" scenario projecting some 720,000 subscribers by the end of the new licence term.

After discussion with the licensee at the hearing, the Commission considers that the assumptions underlying the "positive" scenario are the most reasonable and, accordingly, has relied on this set of projections in reaching its conclusions. According to these projections the number of subscribers will have grown by 24% from 1 September 1988 to 31 August 1993. In line with this projection, the revenues and expenses as forecast indicate that First Choice could fully recover its cumulative deficit by the beginning of the fifth year of the new licence term.

Programming Plans

The Commission acknowledges the success of First Choice in overcoming the serious financial difficulties with which it was faced. In evaluating First Choice's proposals and commitments for the new licence term, the Commission has taken into account the distinct characteristics of the pay television marketplace and has given consideration to the licensee's past performance, the assumptions underlying its subscriber and revenue projections and its plans for the new licence term.

The Commission has also taken into account the more than 70 interventions received from individuals, representatives of the film, cable and broadcast industries, and from government bodies with respect to First Choice's application for the renewal of its licence.

The conditions of licence and the specific expectations contained in this decision reflect the Commission's general concerns with respect to all Canadian pay television services; they are also in line with the licensee's own commitments as set out in its application and presentation, and as subsequently increased during the hearing.

(i) Exhibition of Canadian Programming

First Choice committed in its application to continue to devote a minimum of 30% of its prime viewing hours and 20% of the remainder of its program schedule to the distribution of Canadian programming.

First Choice requested, however, that the present definition of prime viewing hours for its service (6:00 p.m. to 10:00 p.m. Eastern time) be extended by two hours, to midnight, and that it be permitted to meet its 30% requirement over a block of four consecutive hours, as selected by it, within that six-hour period. The licensee claimed that this change would permit First Choice the flexibility, as dictated by the nature of its Canadian films, to schedule them earlier or later in the evening:

For example, when Canadian material is suitable for children, the existing four-hour block would be used, but First Choice would schedule those films at 6:00 or 7:00 p.m. Where the Canadian film is suitable for adult viewing only... then the current rules would force First Choice to run these films as early as 9:00 p.m. in order to obtain full credit for them.

If First Choice has the flexibility to consider the fourhour block of 7:00 to 11:00 p.m., or 8:00 to [midnight] as prime viewing hours when this problem occurred, then it would have greater flexibility in scheduling.

The Commission is concerned that a shifting block for prime viewing hours as proposed by First Choice, would be difficult and impractical to monitor. At the same time, the Commission is of the view that a degree of flexibility within the prime viewing hours is desirable in the interests of maximizing the exposure of Canadian feature films which are designed to appeal to different audiences. Accordingly, the Commission has determined that prime viewing hours should be defined as the period between 6:00 p.m. and 11:00 p.m. Eastern time. This new definition, which extends the period by one hour while retaining a standardized block, will allow First Choice greater flexibility in scheduling Canadian programs at times appropriate to specific target audiences.

In view of the improved financial performance of First Choice and given the importance of increasing the amount of Canadian programming distributed during prime viewing hours, the Commission has determined that, during the first four years of the new licence term, First Choice will be required by condition of licence to devote 25% of the newly-defined prime viewing hours to the exhibition of Canadian programs. This condition will result in an increase in the time devoted to Canadian programming each semester over that required under the existing condition of licence as well as that proposed by First Choice in its renewal application. Specifically, First Choice will be required to distribute a minimum of 8.75 hours of Canadian programs on average each week during prime viewing hours.

In the fifth year of the new licence term, First Choice will be required by condition of licence to devote 30% of prime viewing hours to the exhibition of Canadian programs, for a total of 10.5 hours of Canadian programs on average each week.

At the hearing, First Choice agreed to increase the number of hours devoted to Canadian programming outside of prime viewing hours to a minimum of 25% in the fifth year of its licence term. Accordingly, First Choice will be required by condition of licence to devote 20% of the remainder of its program schedule to Canadian programs in years one through four, increasing to 25% in year five. The specific details of these conditions are set out in the appendix to this decision.

In Decision CRTC 86-812, the Commission established that the licensee would be awarded a 150% time credit for each new Canadian first-run dramatic production scheduled to commence in prime viewing hours or, in the case of a production intended for children, scheduled to commence at an appropriate viewing time.

The licensee stated in its application that this credit "gives recognition in the long term to the importance of new productions and is a useful incentive to the scheduling of such productions". In order to encourage the distribution of such programming, the Commission has determined that the 150% credit will continue to apply during the new licence term.

At the hearing, First Choice stated that it will license for distribution all Canadian feature films that comply with the general interest pay television licensees' Pay Television Standards and Practices Code. The Commission expects the licensee to adhere to this commitment and to schedule these films evenly throughout its programming day. The Commission also expects First Choice to co-operate with other Canadian pay television licensees to achieve the widest possible distribution of Canadian feature films and other Canadian programming, including the distribution of sub-titled or dubbed versions of French-language Canadian productions.

As the Commission considers that dramatic programs should remain the major component of the Canadian programs distributed by First Choice, the licensee will also be required by condition of licence to ensure that at least 50% of its Canadian programs each year are dramatic programs.

(ii) Expenditures on Canadian Programming

In its application, First Choice committed to expend at least 20% of its gross revenues annually on the investment in or acquisition of Canadian programs. In addition, the licensee proposed that it would increase the level of its expenditures as the number of subscribers to its service increased. Specifically, First Choice proposed to increase its Canadian programming expenditures to 21% of its gross revenues (excluding revenues from DTH subscribers) in the broadcast year following that in which it has attained 460,000 subscribers to its pay television service. Its Canadian programming expenditures would then increase by a further 1% of its gross revenues for every increase of 40,000 in the number of subscribers to its service in the previous broadcast year. Accordingly, based on the licensee's subscriber growth projections, its Canadian programming expenditures would represent 21% of its revenues in year one, rising to 24% by year five.

In addition, in response to concerns expressed by the Commission at the hearing that there could be no guarantee as to when the projected penetration levels would be met, First Choice committed to expend a further 2% of its gross revenues on Canadian programs once its cumulative deficit is fully recovered. At the hearing, the licensee stated:

If all goes well, First Choice certainly will be able to pump between $60 million and $81 million into Canadian production over the current year and the next five years. Virtually all of it will be focused on the Canadian programming which is the hardest to finance and of which there is the greatest shortage --feature-length Canadian drama.

The Commission notes that, should First Choice's cumulative deficit be fully recovered by the beginning of the fifth year of the new licence term, its Canadian content expenditures level will increase to 26% of gross revenues during year five. This would result in its total Canadian programming expenditures amounting to $61.3 million over the new licence term, or an average over these five years of 23% of its gross revenues.

Under the same assumption and using the revised expenditure commitment made by First Choice at the hearing, the amount of the total programming budget to be expended on Canadian programs over the new licence term would increase by an additional $1.2 million in the fifth year over the amounts filed by the licensee as part of its positive scenario.

The Commission considers that it is appropriate for the licensee of a discretionary network to link its Canadian program expenditure commitments to its subscriber level. Accordingly, as indicated in the appendix to this decision, First Choice is required to adhere to these commitments by conditions of licence. The Commission expects the licensee to make every reasonable effort to pay off its cumulative deficit as quickly as possible. At the same time, the Commission expects the licensee to ensure that it maintains in each year of the new licence term the ratio of Canadian to foreign programming expenditures found in its application.

As noted in the Public Notice of today's date that introduces this and the other pay television network renewal decisions, many of the interventions received from members of the independent production community emphasized that they would much prefer the general interest pay television licensees to allocate a greater proportion of their program budgets to licence fees rather than to equity investments. In addition, several interveners commented on the recent increase in First Choice's contributions to equity rather than to licence fees.

In light of these interventions, First Choice reiterated its commitment to license all Canadian feature films that comply with the general interest pay television licensee's code on standards and practices. First Choice also submitted that its licence fee commitments are making significant contributions to Canadian program production and will increase as its subscriber base grows. It noted, however, that its inability to gain direct access to Telefilm funding and the reluctance of conventional television broadcasters to permit a first pay television "window" have had a negative impact on its ability to assist Canadian productions and to acquire attractive Canadian feature films.

First Choice stated that, should it gain direct access to Telefilm funding, it would introduce a new programming initiative, entitled 'Premier Films', to stimulate the creation of some twenty made-for-pay feature-length Canadian films for which First Choice would double its current licence fee.

Nevertheless, First Choice stated that it would accept a condition of licence requiring that at least 60% of its expenditures for the acquisition of or investment in Canadian programs over the new term of licence be allocated to acquisitions. Accordingly, a requirement reflecting this commitment has been established by condition of licence, as set out in the appendix to this decision. In order that the Commission may measure the licensee's performance prior to the expiry of the new licence term, however, the condition will apply to the period from 1 November 1988 to 28 February 1993. During the remainder of the 1992/93 broadcast year, the Commission will expect First Choice to continue to adhere to its commitment.

At the hearing, the licensee also discussed with the Commission the types of expenditures that would be deemed to be acquisitions or investments for the purpose of calculating whether its commitments had been met. These expenditures are set out in attached conditions of licence. The Commission has concluded that the artistic community will benefit more if such expenditures are measured in terms of cash outlays in a particular year rather than in terms of the amortization in that year of part of the capitalized costs of acquiring or investing in Canadian programs. This cash outlay approach will be introduced as of 1 September 1989 to allow licensees to take full advantage of any unamortized portions of previous expenditure on Canadian programs.

Concerning script and concept development funding, First Choice proposed to allocate to FUND $1 million per year, including any recoupment achieved from FUND projects but excluding overhead. The Commission is of the view that the independent production community should be assured of a fixed contribution from the licensee each year for script and concept development and has, therefore, attached a condition of licence to First Choice's licence requiring an expenditure of $1 million during each year of the licence term. Overhead costs and any recoupment achieved from FUND projects are not included in this annual expenditure requirement.

First Choice will also be required by condition of licence to devote at least 50% of its total Canadian programming expenditures each year to dramatic programs.

Finally, in order that the Commission may monitor the Canadian productions exhibited each year by First Choice, the licensee will be required to provide, as part of its annual return, details on its Canadian programming, including information on such matters as the producer, costs, date of release, etc. An abridged version of this report, in which acquisition and investment expenditures will be identified and compared in relative percentages, will be placed on the public file of First Choice.

Other Matters

Closed Captioning

In an effort to increase the availability of closed captioned material on its service, the licensee stated that producers of Canadian material seeking First Choice pre-commitments will be required to provide it with a closed captioned print as a prerequisite of funding.

In its intervention, Ontario Closed Caption Consumers (OCCC) submitted that First Choice often exhibits the non-captioned version of a film when a closed-captioned version is available and that sometimes the first run of certain films is captioned but the repeats of the film are not. First Choice acknowledged that it had experienced some difficulties obtaining captioned material, and agreed to put in place a control mechanism to monitor its closed captioning more closely. It also noted that a significant number of independent producers are not aware of the funding for closed captioning available through Telefilm Canada and undertook to inform them of this.

The Commission expects the licensee within the first year of the new licence term to make use of the Line 21 text capability to inform deaf and hearing-impaired subscribers to its service who are equipped with a decoder permitting the reception of captioned information, of the time at which closed-captioned programs are scheduled to appear and to advise viewers of First Choice whenever technical difficulties prevent scheduled captioned programming from being presented.

The Commission acknowledges the efforts made by First Choice in hiring a consultant specializing in captioning matters and notes that it has installed a Telephone Device for the Deaf, to provide for better communication between itself and the deaf and hearing-impaired.

The Commission also encourages the licensee to distribute English captions of French productions that have been dubbed into English, when available.

Sex-role Stereotyping and Violence

All of the general interest pay television licensees adhere, on a voluntary basis, to the Pay Television Standards and Practices Code, which addresses sex-role stereotyping, violence and scheduling. The Commission expects the licensee to continue to adhere to this Code as amended from time to time. In this regard, the Commission notes that First Choice proposed to review its standards and practices on a regular basis with Commission staff. The Commission looks forward to this continuing co-operation.

Ownership Structure

First Choice is controlled by Astral Bellevue Communications Inc. (Bellevue) which in turn is controlled by Astral Bellevue Pathé Inc. (Astral), as approved in Decision CRTC 83-959. Astral holds, either directly or through affiliates, 53.01% of the voting shares of Bellevue and as such is the largest shareholder of the holding company of First Choice. A majority of the voting shares of Astral is indirectly owned equally by Hees International Corporation (the Bronfman family) and Abgreen Holdings Limited (the Greenberg family); however, such ownership is governed ultimately by an agreement pursuant to which the indirect owners of Abgreen Holdings Limited have an option to acquire the Hees interest.

First Choice holds 100% ownership in 129610 Canada Inc. (129610) which was authorized by the Commission to acquire an irrevocable option to purchase 785,454 class "B" voting shares in Premier Choix:TVEC Inc. (PC:TVEC). PC:TVEC is the French-language general interest pay television network operating in eastern Canada. (See Decision CRTC 88-773, issued today). Once 129610 exercises its option, it will own approximately 51% of PC: TVEC's voting stock. First Choice also holds 50% ownership of The Family Channel, the English-language national general interest pay television service for children, youth and families.

At the time it acquired an interest in First Choice, Astral, through a series of related companies, was active in the production, distribution and funding of feature films and video productions for theatre, television, pay television and home video markets. Because of the Commission's concerns regarding the integration of the production and distribution functions of pay television, its approval in Decision CRTC 83-959 was made subject to the condition that the licensee adhere fully and at all times to a number of specific commitments designed to ensure a strict separation between the activities of Astral and those of First Choice.

In its application for renewal, First Choice requested that some of these commitments no longer be imposed as conditions. It argued that a condition of approval respecting the composition of the Board of Directors of First Choice is no longer necessary in the current broadcasting environment. Furthermore, First Choice was of the view that the limitations on Astral's ability to produce films should be addressed through the Pay Television Regulations. Finally, it suggested that conditions of approval relating to the equitable treatment of producers and distributors could be expressed instead as Commission expectations.

The Commission agrees that the composition of First Choice's Board of Directors need not be addressed by condition of licence. The Commission expects, however, that the Board will continue to reflect the diversity of the company's ownership structure.

With respect to First Choice's other submissions, the Commission remains convinced, particularly in light of interventions it received, that safeguards are needed to ensure the separation of First Choice and Astral. At the hearing, Norstar Entertainment Inc. (an independent production company) and the National Association of Canadian Film and Video Distributors complained that First Choice had favoured Astral-funded projects in its investment practices. First Choice confirmed that Astral productions had been the subject of virtually all of First Choice's investment decisions since 1986. This occurred, the licensee stated, because only Astral was prepared to invest in certain First Choice-initiated made-for-pay productions. The licensee agreed, however, to take appropriate measures to avoid First Choice investing large portions of its investments in Astral-financed productions. In this respect, the Commission expects First Choice to direct no more than 25% of its total equity funding, in any year, to Astral-financed or financially-assisted productions.

The Commission considers that it is essential for the future development of the Canadian production industry that Astral play a full and active role in film financing and distribution. However, to ensure that First Choice is perceived to be fair to all producers and as not favouring Astral-financed or financially-assisted productions, the Commission has attached conditions of licence to First Choice's licence with respect to its distribution of films and video productions in which Astral has been involved.

Furthermore, with regard to the separation of First Choice from Astral, the Commission expects that the management of First Choice will be entirely separate, distinct and independent from that of Astral and that the programming acquisition personnel at First Choice will be entirely separate from any Astral connection and will report exclusively, through management, to the First Choice Board. Finally, the Commission expects the licensee to abide by its commitment to treat all producers and distributors on a non-discriminatory basis.

In its application, First Choice also sought an amendment to its condition of licence which reflected the Commission's view that there should be a separation of the ownership and control of pay television networks from cable television systems or other pay television exhibitors. At the hearing, First Choice supported a proposed modification to this requirement such that Commission approval would only be required where the licensee's voting securities were to be transferred to any person who owns more than 5% of the shares in any cable television system or undertaking engaged in the exhibition of pay television.

The proposed modification to First Choice's condition of licence concerning changes in ownership will be reflected in the amendments to the Pay Television Regulations that the Commission intends to publish for comment early next year and which will include requirements in line with those in section 14 of the Television Broadcasting Regulations, 1987.

Pending the enactment of these amendments, the Commission expects First Choice to comply with this section of the television regulations as well as the commitment made at the hearing with respect to the transfer of its shares to persons owing shares in a pay television exhibitor.

Interventions

The Commission has taken into account the views expressed by the many interveners who supported First Choice's licence renewal, including the Government of Ontario and the many representatives of the independent production industry. The latter emphasized the support their projects have received from First Choice and stressed the vital role this pay television network plays in ensuring the production, promotion and exhibition of Canadian films and in developing new scriptwriting and production talent. In general, they consider that First Choice is now in a position to improve its contributions to the Canadian broadcasting system. The Public Notice introducing the renewal decisions released today summarizes these interveners' comments in general terms.

The Commission has also considered the comments of the cable television industry as expressed by the Canadian Cable Television Association, the Ontario Cable Television Association and a number of Canada's largest cable licensees. These interveners spoke of their commitment to the continued development and growth of Canada's pay television services.

In addition, in imposing increased Canadian programming requirements on First Choice, the Commission has taken into account the intervention from the Canadian Broadcasting League opposing First Choice's renewal application on the grounds that the licensee has not contributed enough to the exhibition of Canadian programs.

Fernand Bélisle
Secretary General

FIRST CHOICE CANADIAN COMMUNICATIONS CORPORATION

Conditions of Licence

Nature of the Service

1. The licensee shall provide a regional general interest pay television network service in English, with programming intended for all audiences. The licensee shall not distribute programming from categories 1 (news), 4 (religion) or 5(A) (formal education) of item 6 of Schedule I to the Television Broadcasting Regulations, 1987 and shall not devote more than 5% of its programming schedule during each semester to programming from category 6 (sports) of item 6, with a maximum of 20 hours in any week. The licensee shall devote at least 50% of its programming schedule during each semester to dramatic programs.

Exhibition of Canadian Programs

2. (a) During each semester from 1 November 1988 to 31 August 1992, the licensee shall devote to the distribution of Canadian programs not less than

(i) 25% of the time from 6:00 p.m. to 11:00 p.m. (Eastern time) and

(ii) 20% of the remainder of the time during which it distributes programming.

(b) During each semester from 1 September 1992 to 31 August 1993, the licensee shall devote to the distribution of Canadian programs not less than

(i) 30% of the time from 6:00 p.m. to 11:00 p.m. (Eastern time) and

(ii) 25% of the remainder of the time during which it distributes programming.

For the purposes of condition number 2, 150% credit will be given for time during which the licensee distributes a new Canadian production which commences between 6:00 p.m. and 11:00 p.m. (Eastern time) or, in the case of a new Canadian production intended for children, at an appropriate children's viewing time, and the licensee will receive such a credit for each showing of such a production within a two-year period from the date of first showing by that licensee.

3. In each broadcast year during the term of this licence, the licensee shall devote to the distribution of Canadian dramatic programs not less than 50% of the time that it devotes to the distribution of Canadian programs.

Expenditures on Canadian Programs

4.(a) Subject to paragraph (b), in each broadcast year during the term of this licence, the licensee shall expend on the acquisition of or investment in Canadian programs a percentage of its gross revenues for that year that is not less than the percentage shown in the table below:

Average Number of Residential, Bulk and SMATV Percentage of Revenue/
Subscribers In the Previous Year/Nombre moyen Pourcentage des
d'abonnés du service résidentiel, de groupe et recettes
du STSAC au cours de l'année précédente

459,999 or less/ou moins 20%
460,000 - 499,999 21%
500,000 - 539,999 22%
540,000 - 579,999 23%
580,000 - 619,000 24%
620,000 - 659,000 25%
660,000 - 699,000 26%
700,000 - 739,999 27%
740,000 - 779,999 28%
780,000 - 819,999 29%
820,000 and greater/ou plus 30%

(b) As of the month following the one in which the licensee no longer has a cumulative deficit, the licensee shall expend on the acquisition of or investment in Canadian programs an additional 2% of its gross revenues for the balance of the broadcast year and for each subsequent broadcast year.

5. From 1 November 1988 to 28 February 1993, the licensee shall devote not less than 60% of its expenditures on the acquisition of or investment in Canadian programs for that period to the acquisition of Canadian programs.

6. The licensee shall expend on script and concept development, excluding overhead costs, not less than $833,333 from 1 November 1988 to 31 August 1989 and not less than 1 million dollars in each broadcast year thereafter.

7. In each broadcast year during the term of this licence, the licensee shall allocate to Canadian dramatic programs at least 50% of its expenditures on the acquisition of or investment in Canadian programs for that year.

8. In making the calculations required for the purposes of conditions number 4 to 7, for the period from 1 September 1989 to 31 August 1993 there shall be taken into account only actual cash outlays. Prior to that period, there may be taken into account any current expenditures or any unclaimed expenditures made during the previous licence term for the acquisition of or investment in Canadian programs.

Distribution of Film and Video Productions Involving Astral

9.(a) The licensee shall not distribute any film or video production with respect to which Astral has carried on activities other than financing or distribution.

(b) Where Astral has carried on financing or distribution activities with respect to a film or video production, the licensee shall not distribute that film or video production unless all actual production and creative control, apart from financial approvals which the pay television licensees normally require, remains the full responsibility of an independent Canadian production company.

10. Definitions

In these conditions:

"broadcast year" means the period from 1 November 1988 to 31 August 1989 and each 12-month period thereafter beginning on 1 September.

"Canadian program" means a program that qualifies as a Canadian program in accordance with the criteria established by the Commission in the appendix attached to Public Notice CRTC 1984-94 entitled "Recognition for Canadian Programs" and the appendix and schedules attached to Public Notice CRTC 1988-105 entitled "Amendments to the definition of a Canadian program as it relates to certain types of animated productions and as it relates to expenditures on all productions."

"cumulative deficit" does not include any deficits from the operations of Premier Choix:TVEC or DTH operations.

"dramatic program" means a program described in categories 7(A) to 7(F) of item 6 of Schedule I of the Television Broadcasting Regulations, 1987, SOR/87-49.

"expend on acquisition" means

(a) expend to acquire exhibition rights for the licensed territory, excluding overhead costs;

(b) expend on script and concept development, excluding overhead costs; or

(c) expend on the production of filler programming, as defined in section 2 of the Pay Television Regulations, SOR/84-797 including direct overhead costs

and "expenditure on acquisition" has a comparable meaning.

"expend on investment" means expend for the purposes of an equity investment or an advance on account of an equity investment but not overhead costs or interim financing by way of loan

and "expenditure on investment" has a comparable meaning.

"new Canadian production" means

(a) a Canadian dramatic program which exceeds 75 minutes in duration and in relation to which all financial expenditures made by the licensee were made prior to the commencement of principal photography or taping and in which principal photography or taping was completed after 1 January 1985 or

(b) a Canadian program intended for children which exceeds 25 minutes in duration and in relation to which all financial expenditures made by the licensee were made prior to the completion of principal photography or taping

and which is a program that has never been broadcast in English in the licensed territory.

"revenue" means revenue from residential, bulk and SMATV subscribers and does not include revenue from DTH subscribers or any return on an investment in programming.

"semester" means the four-month period from 1 November 1988 to 28 February 1989 and each six-month period thereafter beginning in March and September.